Multiple choice

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An agent is entitled to such commission as was greed between himself and his principal at the time of the entering into contract of agency. Gopal wanted to lease out his house and he asked the local estate agent, Shivappa, to find a tenant for him. As per the terms of Shivappa, which were generally followed by all the agents of the locality, an agent would get one month's rent as commission in the case of leasing and 5% of sales price in the event of sale. Shivappa found one Krishappa who was desparately looking for a house to stay. Krishappa met Gopal for negotiation, and on a further talk, he found that Gopal was really interested in selling the house. Finally, instead of taking the house on a rent of Rs. 2000/- per month. Krishnappa bought the house for Rs. 2 lakhs. Gopal offered to pay Rs. 2000/- to Shivappa, since that was the rent he specified to Shivappa while instructing Wm to find a tenant. But Shivappa demanded the commission on the sale price.

  1. Shivappa should get only Rs. 2000/- since he was asked to find a tenant for that rent.

  2. Shivappa should get Rs. 10,000/- taking into account the ultimate result of the transaction.

  3. Shivappa should get Rs. 10,000/- taking into account the ultimate result of the transaction.

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A Correct answer
Explanation

Shivappa's commission is limited to what was agreed upon in the agency contract. Gopal specifically instructed Shivappa to find a tenant, and the agreed commission was one month's rent. Even though the transaction ultimately resulted in a sale, Shivappa was not authorized to negotiate that outcome. Commission follows the scope of the actual agency, not the ultimate result beyond that scope.

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